Sell underperforming 1 bed IP & Opportunity cost ?

[Alex P Keaton]

The other idea i've been tossing around is buying an IP with the view of moving into it in 5 - 10 years time. I dont know how much longer I want stay in my highgate ppor as it is quite small and I feel like I want more space.

I'd like to live near the train line as I like to ride my bike to work. I'd love to buy in Mount Lawley but thats just too expensive for me so I've been thinking of buying a villa in either Inglewood or Bayswater. Villas start at between $350 - $450 K.

There are some streets such as from 7th ave through to 10 ave that run off beufort street. I'd like to buy on the nice side of beaufort street (the inglewood side rather than the maylands side, as I dont like Maylands) Near the little inglewood iga or the inglewood coles would be good I think.

 

[Jake D]

1. I was going to wait to see mortgage broker in my holidays in a couple of weeks time but i've decided to make an appointmen next week now as I dont want to wait any longer. I think I just need to take along my pay slips and bank account statements for the initial consult dont I?

For an initial consult she won't need to see any docs, just turn up with figures in your head.

If it sells for $240 k and I have a $200 loan on it, how much money approximately will I make (im not taking into account all the negative gearing over the years btw, just how much cash in hand i'll have). Agents fees are what about 2 %, advertising fees, what other costs ?

2-3% plus marketing fees of about $800 is what you'll hear from most places.
Some are either desperate for listing, or just nicer, and will give you a flat 2%, no marketing (Harcourts just offered me that.)

8. I'm thinking living here at mum and dads i'll be able to get a loan for $350 k - $450 k, which means i'll be able to get something decent that will grow. It will be neagatively geared but i'll have my $70 k savings in my bank which will see me through the first few years of negative gearing! Then I'll buy something again in another market as soon as my ip is close to or neutral cash flow.

10. What do you think of my plan? Just remember I'm not as gung ho as others. I'm a bit more conservative investor than others here, plus I need to be a bit conservative in the next 5 years as I have to replace my car. Once I have bought my car I can then invest a bit faster.

I think if you look harder you could find something with growth potential that is cashflow neutral (and from your posts, i think that it important to you, so keep looking)

9. I will need to upgrade my car in the next few years too, so I dont plan to buy another ip again after this one for a good few years as i'll have a $20 k car loan. I plan to buy a 3 year old hyundai sportswagon with less than 60,000 km on it priced less than $18,000. I want to pay it off in a period of 3 years.

I'm a big fan of Hyundais as a sensible budget choice. So you get thumbs up from me here.

 

[D.T.]

The other idea i've been tossing around is buying an IP with the view of moving into it in 5 - 10 years time. I dont know how much longer I want stay in my highgate ppor as it is quite small and I feel like I want more space.

I'd like to live near the train line as I like to ride my bike to work. I'd love to buy in Mount Lawley but thats just too expensive for me so I've been thinking of buying a villa in either Inglewood or Bayswater. Villas start at between $350 - $450 K.

There are some streets such as from 7th ave through to 10 ave that run off beufort street. I'd like to buy on the nice side of beaufort street (the inglewood side rather than the maylands side, as I dont like Maylands) Near the little inglewood iga or the inglewood coles would be good I think.

Ride your bike to work and live near the train line.... why do you want to go into bad debt for a car?

 

[Alex P Keaton]

Ride your bike to work and live near the train line.... why do you want to go into bad debt for a car?

Because there are some places I travel to where I need a car. i like to have my own wheels too. Anyway I dont want to buy for a few more years, at this stage i'm just preparing as I need to financially plan for it. Goal is to get to 200,000 km's. I've had the car for nearly 18 years and i'm up to 147,000 km's

 

[Alex P Keaton]

my message was too short and it wouldn't let me reply to Jake D
i'll try again another time

 

[D.T.]

Because there are some places I travel to where I need a car. i like to have my own wheels too. Anyway I dont want to buy for a few more years, at this stage i'm just preparing as I need to financially plan for it. Goal is to get to 200,000 km's. I've had the car for nearly 18 years and i'm up to 147,000 km's

I didnt say not have a car, i said dont have bad debt for a car

 

[Alex P Keaton]

I didnt say not have a car, i said dont have bad debt for a car

Ah I see.

I'd rather go into bad debt than use any of my savings.

I'm thinking positively though, that I wont be upgrading for at least 3 more years!

 

[Alex P Keaton]

PPOR purchased 2008 for $255 k (loan $177 K) - Valued at approx $320 - $350 k in 2014

IP purchased 2009 for $210 k (loan $199 K) - Would get approx $230 - $240 k if sold today

IP is a 41 sqm 1 bed in Dianella
Also still negatively geared even after holding for 4 years.

Properties are (approx) conservatively worth $230 k + $ 320 K = $550 K
I havent had them valued.

Currently my LVR is 376/550 = 68 % LVR

If I sold my IP my LVR would be 177/320 = 55% LVR

I always thought over the past couple of years that seeing as it wont take long for it to become neutral I may as well hang on to it and over the years it would become positve cash flow and cg will happen but now I'm looking at the opportunity cost.

I could sell off this dead dog and put my cash into something that will perform better. I'd buy in a rising market and something like a villa this time in the outer suburbs but not too far out so it wont be too ng. Something MTR said to me the other day really struck a chord with me.

Would you cut your losses and sell even though you might be lucky to only make $20 k from the ip or even just break even.


thanks

I've just been going over my old notes.

This ip in the last financial year holding costs
$86 pw before tax
$49 pw after tax

Its only gone up about $30-$50 k in value since 2009

$49 pw after tax doesn't seem like a lot but for someone on my $60 k income it could limit me in the type of property I buy next.

I wonder when it will become neutral??! Anyhow I'm thinking the next property I buy will need to be a newer ip with depreciation/less repairs!

If I put it on the market and my ip doesn't get an offer for the amount Im asking,how much out of pocket will I be with the agent if I take it off the market?


I'll be seeing my accountant later to go through some scenarios.

 

[Alex P Keaton]

The other thing to take into consideration is:

There is talk of value adding through

1. rendering the whole complex
2. allocated car bars
3. Building a storage unit for each ip

So it might be worth it to hold on for a while to see if this goes ahead. It will hinge on all owners agreeing to do it though!

 

[Alex P Keaton]

Negatives:

If this goes ahead & I'm in the middle of selling there most likely will be a special levy which would turn off buyers

 

[westminster]

I've just been going over my old notes.

This ip in the last financial year holding costs
$86 pw before tax
$49 pw after tax

Its only gone up about $30-$50 k in value since 2009

$49 pw after tax doesn't seem like a lot but for someone on my $60 k income it could limit me in the type of property I buy next.

I wonder when it will become neutral??! Anyhow I'm thinking the next property I buy will need to be a newer ip with depreciation/less repairs!

If I put it on the market and my ip doesn't get an offer for the amount Im asking,how much out of pocket will I be with the agent if I take it off the market?


I'll be seeing my accountant later to go through some scenarios.

It will cost you advertising but that is it.

The other thing to take into consideration is:

There is talk of value adding through

1. rendering the whole complex
2. allocated car bars
3. Building a storage unit for each ip

So it might be worth it to hold on for a while to see if this goes ahead. It will hinge on all owners agreeing to do it though!

Unless there is a lot of money in the fund get out now. You don't want to be asked for money in a special levy circumstances as you'll never see it back. It's unlikely that any of those things will vastly improve rent though they may improve value somewhat.

 

[Alex P Keaton]

It will cost you advertising but that is it.



Unless there is a lot of money in the fund get out now. You don't want to be asked for money in a special levy circumstances as you'll never see it back. It's unlikely that any of those things will vastly improve rent though they may improve value somewhat.

There is approx $5000 in the admin fund and $5000 in the reserve fund. I think looking at this in the long term I think its best to sell.

I think the special levy would only go ahead if all owners agree to the works.

ah ok, cost is just the advertising. I think I'll start making some enquiries.

thanks for your help

 

[impala67]

There is approx $5000 in the admin fund and $5000 in the reserve fund. I think looking at this in the long term I think its best to sell.

Reserve Fund doesn't seem like much at all.

I think the special levy would only go ahead if all owners agree to the works.

I was looking briefly through the thread to see how many units/apartments in total. If it is a high, I doubt they'd agree.

 

[Jake D]

Harcourts charge commission only, no advertising. You could use them to test the water for free. Problem is they sign you up for 4 months exclusive listing...

 

[Alex P Keaton]

Harcourts charge commission only, no advertising. You could use them to test the water for free. Problem is they sign you up for 4 months exclusive listing...

Oh Cool ok. Well I'll have a think about it. Thanks

My tenant signed a 6 month lease that ends in 5 months time. How does this effect things? If the buyer wants to move in I can't exactly kick out the tenant can I?! Maybe I'll need to wait 2-3 months before putting it on the market?

My accountant did the sums and I know the amount of profit I can make at set amounts, however I'm keeping tight lipped.

 

[Alex P Keaton]

Harcourts charge commission only, no advertising. You could use them to test the water for free. Problem is they sign you up for 4 months exclusive listing...

Reserve Fund doesn't seem like much at all.



I was looking briefly through the thread to see how many units/apartments in total. If it is a high, I doubt they'd agree.

Yeah I agree! Only 1 person has to say no and your stuffed.

 

[impala67]

Was finance a problem with the 41m2, or did you just have to use a bigger deposit when you bought it?

 

[D.T.]

Was finance a problem with the 41m2, or did you just have to use a bigger deposit when you bought it?

Cross Coll

 

[redwing]

There is approx $5000 in the admin fund and $5000 in the reserve fund. I think looking at this in the long term I think its best to sell.

This seems very low, how old is the complex and how many units?

 

[Terry_w]

I'd probably sell it myself.

But before deciding you should do a thorough analysis of the costs. Work out what you have to pay to sell it - agents, conveyancing, loan discharge, CGT etc

Work out how much money you would have left too. If you use this to pay off the PPOR how much interest will you save - you don't appear to be living there anymore so whether you do this or not may be another question.

Then work out if you purchased something new how much to get into the property and cashflow of that property etc.